Suppose the economy is producing below the natural rate of output and the government is suffering from large budget deficits. To deal with the deficit problem, suppose the government takes a policy action to reduce the size of the deficits
This policy action will cause ________ in the unemployment rate in the short run and ________ in inflation in the short run, everything else held constant. A) an increase; an increase
B) a decrease; a decrease
C) a decrease; an increase
D) an increase; a decrease
D
You might also like to view...
Private costs are:
a. the full resource costs of an economic activity. b. always less than social costs. c. the costs of an economic activity borne by the producer. d. all of these.
Assume that a country's government influences the exchange rate through active central bank intervention, with no pre-announced path. This policy is known as a(n):
a. floating exchange-rate policy. b. managed floating exchange-rate policy. c. fixed exchange-rate policy. d. crawling-peg exchange-rate policy. e. interventionist exchange-rate policy.
Which of the following annual real GDP growth rates would be needed just to maintain output per capita in the United States?
a. 10.0 percent b. 2.5 percent c. 1.0 percent d. 7.0 percent e. 3.5 percent
A picture-frame company operates in a monopolistically competitive market. Its short- run equilibrium price is $80 and its ATC is $65 . It sells 100 picture frames a week. Ignoring for now its long-run position, in the short run,
a. the firm makes zero economic profit, zero accounting profit, but $1,500 normal profit b. other picture-frame companies will leave the market because it knows new firms will enter to drive price and economic profit down c. the firm makes an $80,000 accounting profit d. the firm makes an economic profit of $1,500 e. the market demand curve will shift to the left as more firms enter the market